Why are there no provisions for federal and state income taxes in Face Foundrie's financial statements?
Face_Foundrie Franchise · 2025 FDDAnswer from 2025 FDD Document
The Company is structured as a limited liability company ("LLC") under the laws of the state of Minnesota. Accordingly, the income or loss of the Company will be included in the income tax returns of the members. Therefore, there is no provision for federal and state income taxes.
The Company follows the guidance under ASC 740, Accounting for Uncertainty in Income Taxes. ASC 740 prescribes a more-likely-than-not measurement methodology to reflect the financial statement impact of uncertain tax positions taken or expected to be taken in the tax return. If taxing authorities were to disallow any tax positions taken by the Company, the additional income taxes, if any, would be imposed on the member rather than the Company. Accordingly, there would be no effect on the Company's financial statements.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 73)
What This Means (2025 FDD)
According to Face Foundrie's 2025 Franchise Disclosure Document, the company's financial statements do not include provisions for federal and state income taxes because of its structure as a limited liability company (LLC) under Minnesota law. This means that Face Foundrie's income or losses are passed through directly to its members' income tax returns, rather than being taxed at the company level.
This structure affects how Face Foundrie handles uncertain tax positions. The company follows ASC 740, which requires a "more-likely-than-not measurement methodology" to account for the impact of uncertain tax positions. If taxing authorities disallow any tax positions taken by Face Foundrie, the resulting income taxes would be imposed on the members, not the company itself. Consequently, these potential tax liabilities would not be reflected in Face Foundrie's financial statements.
For a prospective Face Foundrie franchisee, this information is primarily relevant to understanding the financial structure of the franchise company itself, rather than the franchisee's own tax obligations. Franchisees should consult with their own tax advisors to understand how their individual business income from a Face Foundrie franchise will be taxed.